JSE Issues New Minimum Order Sizes for Off-Screen
February 24, 2011
JOHANNESBURG, 21 FEBRUARY 2011 – The JSE continues to raise
the bar in the regulation of its equity derivatives market with increased trades
being driven on-screen. Already, a portion of the trade in the JSE’s most liquid
equity derivatives must occur on-screen. Last week, in a bid to improve
transparency and deepen the market, the on-screen rules were applied to a
further ten instruments.
The application of new minimum off-market
trading rules to additional JSE equity derivatives contracts means that all
trades smaller or equal to the stated minimums will have to be traded on Nutron,
the equity derivatives trading platform. Minimum off-market trading rules
already apply to certain equity derivatives contracts derived from constituents
of the FTSE/JSE Top 40 index.
From 2002 to present, the JSE’s strategic
focus for the equity derivatives market was on expanding product range to meet
market demand. Now with the market maturing and a wide suite of equity
derivatives available, the strategic focus has shifted to refining how these
products are traded.
“We believe on-screen trading to be an important
step in growing and deepening our market. As seen in other derivatives markets,
the implementation of a central order book, resultant transparency and increased
competition fuels the growth of a market,” says Allan Thomson, Director of
Derivatives Trading at the JSE. An electronic central order book, where all bids
and offers are automatically executed when trades and prices match, already
exists within the JSE’s equities market.
Equity derivative instruments
affected in the latest announcement include Anglo Platinum, Absa, Bidvest,
Exxaro Resources, FirstRand, Gold Fields, Harmony Gold, Kumba Iron Ore, Remgro
At present, equity derivatives clients place orders with
their brokers, who in turn first by the underlying share before writing and
reporting a derivatives trade to the exchange. This has certain limitations,
including that clients cannot see the depth of the market. Clients can also not
see other market participants’ prices and therefore don’t know if they’re
getting best execution.
The central order book, in contrast, will open
up the market substantially, moving from a ‘captive market’ (one client, one
broker) to a free market (one client, multiple brokers competing on price). This
increased transparency and hence competition will ultimately benefit the client,
leading to a tighter bid/offer spread.
Thomson adds: “We are confident
that this move will open up the South African derivatives market to an
international audience as well as encouraging algorithmic trade.”
FOR FURTHER INFORMATION PLEASE CONTACT:
Corporate Communications Consultants (Pty) Ltd
Tel: (011) 463
Cell: 072 452 1772
On behalf of Allan Thomson
082 377 0717